Editorial | When Fayval speaks

While her Cabinet colleagues have hogged the show, talking about everything – from its economic impact to plans for recovery, Fayval Williams, the finance minister, has been peculiarly quiet in the month since Hurricane Melissa devastated western Jamaica.

So, Minister Williams should have much to say when she finally addresses Parliament on Tuesday, including outlining her proposed way forward for dealing with the fiscal turbulence wrought by the storm, her plans for engaging multilateral partners for support in financing the post-hurricane rebuilding, and her ideas to quickly place the economy back on a path to growth. She might also have a thing or two to say on the efficacy of Jamaica’s existing development model. For the minister now has the data, and a frame of reference, to inform her framing of the policy options she places on the table and any intervention she makes in the conversation on development strategies for the future.

Indeed, from the numbers emerging from the Planning Institute of Jamaica (PIOJ), and other institutions, Jamaica is slowly getting greater clarity, if not comfort, about the real cost of the Category 5 storm. The preliminary data confirm it what economists call a mega event.

The PIOJ now projects a 13 per cent contraction in GDP for the fourth quarter of 2025. At the same time, the World Bank and International Monetary Fund (IMF) estimate direct damage at US$8.8 billion, equivalent to about 44 per cent of Jamaica’s GDP of approximately US$20 billion.

DIFFERENT DIMENSIONS

These figures describe different dimensions of the same national disaster. The World Bank and IMF figures capture physical destruction: homes torn apart, roads washed away, bridges collapsed, farms flattened, tourism facilities damaged, schools and hospitals compromised. This sudden national stock loss represents wealth accumulated over generations.

The PIOJ’s figure captures the loss of economic activity: fewer tourists arriving, factories disrupted, transport dislocated, informal traders unable to operate, crops not harvested, and services interrupted. This is the flow of income, measured over time.

When these are connected, the real scale of the disaster becomes clear – minus the incalculable human dimension.

International disaster research shows that indirect economic losses typically exceed direct physical damages. The accepted approach used by the World Bank, the United Nations, and the IMF is that in small, open economies like Jamaica, indirect losses range from 1.4 to 1.8 times direct damage.

Applying that method to Melissa suggests a total economic impact well in excess of 100 per cent of GDP, spread over several years. Jamaica has effectively lost the equivalent of an entire year of national production when physical damage and lost future income are properly combined.

This mega disaster is not unprecedented in the Caribbean. And with the effects of climate change, Jamaica has to prepare for more such future events. Indeed, in the decade to 2025, there were 10 Category 5 storms in the Atlantic hurricane season. Two of those Category 5 storms, including Melissa, were this year. In the previous decade, by comparison, four hurricanes reached Category 5 ferocity – all of them in 2005. In the current decade, half of the Category 5 storms made landfall against one in the previous decade.

These facts of climate change notwithstanding, the PIOJ’s pessimistic fourth-quarter projection should not lead Jamaica to despair given past history.

After Hurricane Ivan in Grenada (2004), total damage exceeded 200 per cent of GDP. Yet the recorded GDP contraction in the worst year was only in single digits.

After Hurricane Maria in Dominica (2017), damage also surpassed 200 per cent of GDP while annual GDP fell by around 10 per cent. Massive balance-sheet destruction is often accompanied by smaller, but persistent, GDP declines over time.

HISTORICAL PATTERN

Melissa could well fit this historical pattern. A 13 per cent GDP contraction in one quarter is likely to translate to roughly a three to four per cent annual output loss if concentrated in that period. That is entirely consistent with direct damage of 44 per cent of GDP and total losses likely exceeding national output.

This matters because it sets the context for the conversation Jamaica must now have with itself and with the world. Recovery on the scale that Jamaica now needs cannot be financed by domestic taxation or by ordinary borrowing without risking debt distress. Pretending otherwise would be economically dishonest and socially dangerous. Indeed, it is useful background that the US$150 million the administration is committed to lend to the light and power company, Jamaica Public Service (JPS), for post-Melissa repairs, represents the total amount flowing from the payout of the Government’s catastrophe bond for the hurricane. It is also two-thirds more than it received under its parametric insurance scheme with the Caribbean Catastrophe Risk Insurance Facility (CCRIF).

Prime Minister Andrew Holness has already signalled his government’s intention to engage the international financial community for additional support. That process needs to start soon. And with urgency. Minister Williams, therefore, is being looked to for the details.

Among the specifics Jamaicans expect to hear from Minister Williams are her initiatives for aggressively pursuing concessional multilateral loans, grant-based climate and disaster financing; debt-for-climate funding; and debt-for-resilience swaps. Jamaica should also be looking at expanding catastrophe insurance coverage, as well as other innovative climate finance instruments.

It is not unreasonable to expect international help. Jamaica is paying today for climate patterns driven largely by the industrial history of richer nations.

But Melissa has also exposed the fragility of the old development model. But that is not a cause for national despair.

Recovery and reconstruction, properly managed, can lift growth, improve productivity, and modernise the economy. However, managed poorly, it can lock Jamaica into debt and disappointment for a generation.